Thursday, February 29, 2024

Listen to 80 lakh owners

Rehman Sobhan urges govt about Grameen Bank at micro-credit roundtable
The government should heed the calls of 80 lakh Grameen Bank shareholders and let a democratic process determine how the organisation will be run, eminent economist Rehman Sobhan said yesterday.
“If you respect democracy, the prime ownership rests with the principal shareholders of the organisation. This is the simple proposition you have to keep in your mind — what do 80 lakh owners want in the organisation,” he said.
“Address their needs. Are they complaining about how the organisation is being run? Let the democratic process decide how the activities of the organisation should be conducted.”
“All organisations respond to democratic mandate through the instrument of ownership and accountability, with the principal accountability comes through the process of who own it. The whole thing has to be done through the democratisation of ownership,” Sobhan said.
He made the remarks at a roundtable on “Microcredit and Poverty Alleviation” organised by leading Bangla daily Prothom Alo at its office in the capital.
The comments came days after the government removed Prof Muhammad Yunus from Grameen Bank — a move considered by many as a plot to take control of the country’s most prestigious organisation.
The economist said there are many misgivings about the concept of microcredit, and the notion that microcredit is supposed to alleviate poverty is pointless.
He mentioned the government spends 30 to 40 percent of its annual development budget for poverty alleviation and said, “You can easily measure the government’s investment in the area in the last 20 to 30 years and the reduction in poverty. Then you will reach a conclusion for who is responsible for what.”
“In this circumstance, we are now caught in a totally ridiculous discussion. What you have to do is to put it into perspective.”
Sobhan said microcredit creates opportunity for people to get out of extreme poverty.
“The lesson should be what would be our direction from here. This is a 30-year-old sector and a lot of significant changes have taken place.”
Sobhan said the great contribution of Grameen Bank is that it recognises the ownership of its shareholders.
“The government contributed Tk 1.8 crore out of Tk 53 crore of capitalisation of an organisation, and now claims to be the supreme owner of the organisation,” he said.
Former Bangladesh Bank governor Salehuddin Ahmed said there has been a microcredit boom in Bangladesh, as the poor did not have any access to finance.
“Many programmes and projects were taken to help the poor in the past, but nothing worked.”
“The sector is very disciplined and everyone should think what would have happened if microcredit had not existed. Its impact can only be felt but can not be measured easily by index,” he said.
SR Osmani, professor of economics at the University of Ulster, said the ongoing discussion on microcredit in the media is misleading.
“They talk about high interest rates. But they never consider that commercial banks do not want to lend money to the poor and will not be able to do so even if they want to.”
“It will be pointless to compare interest rates between microfinance institutions and commercial banks.”
Osmani countered the claim that microcredit borrowers have been continuing loans for years and said, “The same happens in the formal sector, where entrepreneurs continue bank loans as long as they are alive. Then, why is this double standard?”
He came down hard on the critics of the concept of microcredit, who say it could not eradicate poverty despite being in practice for three decades in Bangladesh.
“The politicians have been spending thousands of crores of taka for years in the name of poverty alleviation. But we do not see any reduction in the poverty level.”
Referring to studies between 1988 and 2008, Osmani said, “Those who participated in microcredit programmes were better off than those who were not involved in any microfinance institutions.”
MM Akash, professor of economics at Dhaka University, said the spectrum of interest rates in the sector creates suspicion. If one microfinance institution, such as Grameen, charges 10 percent flat rate, others charge 15 to 20 percent.
“Microcredit Regulatory Authority needs to regulate this.”
The economist said differential treatment of microfinance institutions has made a mess in the sector that needs to be cleared.
Hossain Zillur Rahman, former adviser to a caretaker government, said Grameen Bank has been unfairly put in the dock on various grounds.
“We see a major danger in this, as many of our microcredit-related achievements such as girls’ enrolment in schools will be questioned,” he said.
Binayak Sen, research director of Bangladesh Institute of Development Studies, said the government spends Tk 27,000 crore for poverty alleviation every year.
“This has been going on for years. But we do not see any dramatic change in poverty alleviation,” he said.
Prothom Alo Editor Matiur Rahman also spoke at the roundtable.


Courtesy of The Daily Star

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